Bear Stearns upgraded LeapFrog Enterprises (LF) to outperform from peer perform.
Analyst Jennifer Childe says channel checks suggest LeapFrog's products are selling very well at the retail level. She notes management confirmed all of the $25 million to $26 million of missed third-quarter sales were made up during the first few weeks of the fourth quarter. Childe says she's confident that if LeapFrog's technology-based educational products continue to sell well at the retail level, the company will report a strong fourth quarter.
She thinks recent insider selling, including nearly two million shares sold by Michael Milken, may be spooking investors. Yet, at only 21 times her $1.55 2004 earnings per share estimate, the shares are inexpensive relative to their estimated three-year growth rate of at least 25%. Childe sees $1.27 2003 earnings per share.